Alkane Resources Limited (ASX:ALK) is leveraged to the new US defence law that prevents the purchase of rare earth magnets from prohibited countries, like China, Russia, North Korea and Iran.
As an independent supply source of rare earths from its $1.3 billion Dubbo project, Alkane sees the new US act as increasing demand.
US President Donald Trump has signed into law the John S McCain National Defense Authorization Act, which sets an increased budget for defence expenditure.
Section 871 of the act prevents the purchase of rare earths magnets from prohibited countries.
Multi-commodity explorer and miner Alkane sees this as a boost for its Dubbo project, which contains deposits of rare earths, hafnium, niobium and zirconium, since it represents an independent source.
A principal use for rare earths metals from the project is magnets, used across the automobile, renewable energy, aerospace, robotics and telecommunications industries globally.
Currently, China produces 85-90% of the world’s rare earth magnets and 90% of rare earths magnets consumed by the US military are produced by China.
World demand is outstripping supply and a shortfall of rare earths magnets is predicted by 2020.
This development follows a statement earlier this year by Prime Minister Turnbull at the time of his visit to the US, which indicated an intended joint cooperation with the US on rare earths and high-performance metals.
According to Alkane managing director Nic Earner, US needs could not be met without investment in new rare earths projects.
“Alkane’s Dubbo project is one of the few in the world which does not have a major Chinese shareholding or offtake committed to China,” he said.
“This US development also opens the door for Australia in the downstream value adding manufacture of rare earth magnets.”
Alkane’s Dubbo project, which has a mine life of more than 70 years, is construction ready with approvals in place and is awaiting financing.
Funding of the project to date has been assisted by Alkane’s nearby Tomingley Gold Mine, which generated $60.1 million in cash flow for the year to June 2018, and Alkane currently has cash reserves of $80 million.
In signing the act into law, President Trump described it as “the most significant investment in our military … in modern history”.